Good results for goodwill on its bid for COVID-19 business interruption

A California state court denied an insurer's motion to dismiss Goodwill Industries in Orange County & # 39 ;s COVID-19 business interruption following a clear review of how California & # 39 ;s federal courts applied (or rather incorrectly applied) California & # 39; s COVID precedent. 19-case. The case is Goodwill Industries in Orange County, California against Philadelphia Indemnity Insurance Co. No. 30-2020-01169032-CU-IC-CXC (Cal. Super. Ct. 28 January 2021)

A single appeal, issued several years ago, long before the perception of COVID-19 and its resulting losses , has taken center stage in California COVID-19 disputes: MRI Healthcare Center of Glendale, Inc. v. State Farm General Insurance Co. ., 1

87 Cal. App. 4 766 (2010). The Human Rights Court considered whether an MRI machine failed to "ramp up" due to an internal defect after it was "ramped down" (or demagnetized) constituted a covered loss. The court found that it was not, for "loss" required that "any external force must have acted on the insured property to cause a physical change in the condition of the property." Id. at 780 (emphasis added) The failure of the MR machine to switch on again after being switched off 'stems from the inherent nature of the machine itself rather than actual physical' damage. '” Id.

Goodwill court recognized that California federal courts interpreted MR to "require a physical alteration of the property or permanent abolition of the property to qualify as" direct physical loss. " Without commenting on the soundness of this interpretation, the California State Court in Goodwill pointed out that neither party had cited a case in California and resolved the issue of coronavirus or COVID-19 causing "direct physical loss" of property

In any case, Goodwill Court also found that the policyholder's express allegations that coronavirus and COVID-19 caused direct physical loss and damage to its property differ from Goodwill's claims from those brought before a federal court. Alleged goodwill:

• Coronavirus and COVID-19 are found in respiratory droplets called aerosols that stay on surfaces and in the air for up to a month.
• , deadly and dangerous.
• Coronavirus and COVID-19 were present on Goodwill's properties at the time of the decision to close the state and county; and
• When Go odwill reopened its properties, its employees tested positive, and it had to carry out “additional cleaning and sanitation to respond to and remove coronavirus and COVID-19 from physical surfaces in its insured premises and properties in accordance with public health orders requiring such measures. to protect against the coronavirus and COVID-19.

If the court interpreted these allegations as true, it could not legally agree that they did not show "direct physical loss" in accordance with MR . According to the court, unlike goodwill, the policyholders in the previously decided federal cases did not claim that COVID-19 physically transformed their property. Claims matter.

Finally, the Court noted the "second standard" applied by federal courts. Goodwill the Court was not convinced that it had a "sufficiently complete record … to legally determine that coronavirus and COVID-19 did not, in any way, cause damage to property."

The goodwill court decision is in line with other out-of-California court decisions, and it reflects a well-founded approach to California's precedent and the application of state property law to the allegations in COVID-19 business interruption claims.